Problems: 1. The graph below illustrates the marginal cost curve for a perfect competitor. Assuming that the market price is $7: (1) draw the demand curve (2) draw or otherwise indicate the marginal revenue curve (3) indicate the profit-maximizing quantity Price $7 - Quantity 2. What is the shutdown point? Why should a firm shut down if the price falls below the shutdown point? 3. If economic losses are occurring in a perfectly competitive market, what is likely to happen in the long run to: (1) the number of firms in the market (2) the market price in the market (3) the economic loss in the market FOR REVIEW ONLY - NOT FOR DISTRIBUTION MC Perfect Competition 21 - 14